Over at the Financial Times,Gillian Tett* bemoans the glaring absence of Fannie Mae/Freddie Mac reform from the recently enacted FinReg reform, and calls for a wide-ranging debate on the future of those entities. Not right now, babe, we have to finish our national conversation on race first:

So far this year, this GSE issue has attracted scant political attention. Indeed – and astonishingly – the 2,300 page financial reform bill that President Barack Obama signed this week barely mentions these institutions at all.

But back in 2008 the US government effectively nationalised Fannie and Freddie, under the fig leaf of a “conservatorship” scheme. And it has now used some $145bn of taxpayers’ money to prop them up, more than was spent on direct injections into the US banks or car sector.

Worse still, that bill will almost certainly rise further in the coming years. After all, the volume of outstanding mortgages backed by Fannie and Freddie now stands at $5,500bn, around half the mortgage market. GSE entities have acquired private-label mortgage bonds too. In theory, this is limited to top quality loans. In practice, though, there is almost certainly plenty of rot there too.

Thus (guess)timates about the size of the future taxpayer bill now range from $390bn (the Congressional Budget Office) to almost a trillion dollars (from some private sector economists.) It makes the woes of Spanish savings banks seem almost tame.

So is there any chance of seeing a proper “stress test” on this exposure? Or exit strategy? Don’t bet on that soon. These days, the GSEs are the only thing keeping the US mortgage and housing sector afloat, because private sector securitisation has effectively collapsed: last year, for example, nine out of 10 mortgages were underwritten by Fannie and Freddie. And, unsurprisingly, the Obama administration does not want to upset that apple cart by implementing radical reform. Nor does it want to undermine the value of mortgage-backed bonds, given how many of these the Federal Reserve itself now holds.

I can appreciate Tett's concern, but the last thing we need right this second is a concerted effort to "reform" GSE's while Democrats still have overwhelming majorities in Congress. All we would get out of that would be a continuation of the status quo: GSE's underwriting 90% of the mortgage market and backstopped by billions in tax-payer dollars. Plus, the process to getting to that level of reform would undoubtedly include enough racial demagoguery to finance the NAACP's next couple years' worth of operating funds.

Still, the GSE's are a problem hiding in plain sight. Despite years of crisis, most Americans continue to be blissfully unaware of the massive liabilities they are taking on for the sake of Fannie & Freddie. That's because news about these ostensibly private companies is largely relegated to the business section, and all bad news about them is relegated to the classic Friday-Night-News-Dump or, in a pinch, Christmas Eve. Yayy! Transparency!

Democrats don't like to talk about this because the GSE's are the easiest way for them to operate an off-the-books national housing policy with little oversight, and plenty of financial upside for their executives/operatives, with all of the losses borne by the tax payers.

Republicans don't like to talk about this because they are idiots. I mean, how else to explain their unwillingness to go after such a large, obvious target? And, even if they did, we know how it would go down: lots of acturial speeches from Charles Grassley, lots of harrumphing press conferences from Richard Shelby, lots of calls for Susan Collins to "do the right thing," etc. Republicans would never do something as gauche as, say, subpoena Rahm Emmanuel to ask him about his service as a member of the board of Freddie Mac during the time it engaged in accounting fraud...or ask Maxine Waters about her service as a member of the board for an LA bank that was deep into the subprime loan market...or ask the many members of the Congressional Hispanic Caucus who pushed their constituents into subprime, all underwritten by the GSE's. I could go on.

Reform of Fannie and Freddie can only happen after political war, and it is a war the Right can win, but only if it is fought like one.

*whose Fools' Gold is one of the best books you can read about derivatives and their effects in the Crash of '08.